Additional Insights

Summary

Clipper Fund has outperformed the S&P 500 Index for the last three and
five years.1

Over the most recent one, three and five year periods, a $10,000 investment
in the Fund grew to $11,769, $14,482 and $20,945, respectively.1

At a time when active investment strategies are out of favor, historical data
indicates active managers may be poised for a rebound.

Our Portfolio is positioned to take advantage of select opportunities in
today’s market including global leaders selling at bargain prices, dominant
lesser known businesses in necessary economic niches, blue chips of
tomorrow, and beneficiaries of short-term misperceptions.

Our Portfolio is also positioned to avoid potential losses facing the index if
the prices of an overvalued but widely owned group of companies we refer
to as dividend darlings decline in the years ahead.

The average annual total returns for Clipper Fund for periods ending December 31,
2017 are: 1 year, 17.69%; 5 years, 15.94%; and 10 years, 6.71%. The performance
presented represents past performance and is not a guarantee of future results. Total
return assumes reinvestment of dividends and capital gain distributions. Investment
return and principal value will vary so that, when redeemed, an investor’s shares may
be worth more or less than their original cost. The total annual operating expense
ratio as of the most recent prospectus was 0.72%. The total annual operating expense
ratio may vary in future years. Current performance may be higher or lower than the
performance quoted. For most recent month-end performance, click here
or call 800-432-2504. The Fund received favorable class action settlements from
companies that it no longer owns. These settlements had a material impact on the
investment performance of the Fund in 2009. This was a one-time event that is unlikely
to be repeated.

This report includes candid statements and observations regarding investment strategies, individual securities, and
economic and market conditions; however, there is no guarantee that these statements, opinions or forecasts will prove
to be correct. Equity markets are volatile and an investor may lose money. Past performance is not a guarantee of future
results.1Past performance is not a guarantee of future results. Investments cannot be made directly in an index.

Results of Our Investment DisciplineOur investment discipline has built wealth for shareholders over the long term.2

In 2017, Clipper Fund continued its long record of building shareholder wealth generating an absolute return of almost 18%. As shown in the chart below, the value of an initial $10,000 investment has increased in all periods shown since we assumed management of the Fund.

On a relative basis, our results have also beaten the market over the last five years. However, while the value of each dollar invested in Clipper Fund has more than doubled since we were entrusted with management of the Fund in January 2006, we still have ground to make up on a relative basis and intend to build on our improved results in the years ahead.2 Our confidence in our time-tested approach is reflected by our investment of more than $145 million in Clipper Fund alongside our shareholders.4

While our disciplined investment approach will not always be rewarded by the market over shorter periods, this active management strategy has produced positive returns for Clipper shareholders in the one, five and 10 year periods, and relative outperformance over the last five years. The cornerstones of our discipline include rigorous research, focused investing, low expenses, alignment of interests, and a
willingness to stand apart from the crowd.

2Past performance is not a guarantee of future results. Investments cannot be made directly in an index. 3As of December 31, 2017. Clipper Fund was managed from inception, February 29, 1984, until December 31, 2005 by another Adviser. Davis Selected Advisers, L.P. took over management of the Fund on January 1, 2006. Past performance is not a guarantee of future results.4As of December 31, 2017.

Why Now May Be a
Good Time to Invest in an
Actively Managed Fund
like Clipper Fund

A Google search for “the death of active management”
produces 1.8 million results. With more than
$1 trillion flowing into passive funds and ETFs and
$1.1 trillion removed from active managers over
the last decade, the tide of investors shifting from
active to passive investment strategies has become
a tsunami.5 This wave has been driven by the
widespread acceptance of data showing the S&P 500
Index has outperformed the average active manager
over the long term. While the data itself is true, the
results are misleading in three important ways.

First, active and passive strategies have historically
moved in a cycle. During parts of this cycle such
as in the last decade or so, passive strategies
have tended to outperform active management.
However, during other parts of the cycle, even
average active managers outperform the index,
often for long periods of time. For example, the
chart below tracks the percentage of large cap
active managers that outperformed the S&P 500
Index over five-year time periods since 1975. The
gold circles represent inflection points where the
number of active managers outperforming the
market began to increase. Underperformance
of active strategies is near an all-time high. If the
cycle were to continue, this may point to potential
wisdom of moving toward active management.

Second, while active managers have historically
tended to underperform when the S&P 500 Index
has galloped ahead, they have tended to outperform
when market returns moderate. In the chart below, each dot above the line represents a
period in which the average manager outperformed
the index. As is clearly shown, the lower the market
return, the more active managers outperform. While
the direction of the market is unknowable in the
short term, the fact the index has more than doubled
in the last five years and the market has gone more
than seven years without a 20% correction versus an
historical average of two-and-a-half years leads us
to expect more moderate returns in the years ahead.
Active management could be poised for a period of
relatively strong results compared to the index.

Finally, certain active funds have outperformed
in the vast majority of rolling 10 year periods. As
a result, while the data shows the average active
manager has underperformed, investors need
not choose an average manager. In fact, data
suggests active managers with certain identifiable
characteristics such as low fees, low turnover,
proper incentives, an experienced team, and a
differentiated portfolio have historically been far
more likely to outperform both the index and the
average active manager. For example, the chart
below shows managers with low fees and a high
investment in their own funds have outperformed
in 89% of all rolling 10 year periods.

Putting these thoughts together, we believe the
headwinds active managers have faced in recent
years could well become tailwinds in the years
ahead. If so, this would not be the first time the
herd mentality proved wrong. After all, not so long
ago everyone was buying residential real estate
based on the then true but ultimately misleading
fact single family real estate prices had never
declined nationwide. We are further encouraged
by data indicating identifiable factors such as
relatively low expenses, alignment of interest and a
willingness to look different from other investment
managers, all of which are central to our firm’s
investment culture, have historically been durable
hallmarks of long-term outperformance.

5Source: Morningstar. U.S. domestic equity funds including open end index funds and ETFs. Date range: 1/1/07–12/31/17. 6Source: Morningstar Direct.
Universe: Large Value, Large Blend and Large Growth. There is no guarantee that the number of active managers outperforming the market will continue to
increase or that active and passive managers will continue to move in cycles. 7Sources: AMG Funds, Morningstar. Chart plots median actively managed large-cap funds, with manager tenure of greater than 10 years (longest-tenured
portfolio manager), annualized three-year rolling returns (with a quarterly frequency) over the 20-year period ending March 31, 2016 against the S&P 500
Index returns. Black plot points indicate periods of outperformance and yellow plot points represent underperformance. The distance of the points from the
diagonal line indicates the degree of over- or underperformance. The fund category used is the Morningstar large-cap fund universe, including growth, value
and blend categories. Performance is net of fees. Past performance is not a guarantee of future results.8Source: Capital Group, based on Morningstar
data. Based on monthly rolling periods from July 1996 to June 2016. Funds in the “Average Fund” group are those U.S. domestic equity funds in the
Morningstar Large Value, Large Blend and Large Growth categories. “Funds with Low Fees and High Ownership” group are those U.S. domestic equity funds
in the Morningstar Large Value, Large Blend and Large Growth categories filtered for the quartile with the lowest net expense ratios (NER) and the
quartile with the highest manager ownership. U.S. index is S&P 500 Index. The index is unmanaged and, therefore, has no expenses. Investors cannot
invest directly in an index. Past performance is not a guarantee of future results.

How is Clipper Fund
Positioned to Take Advantage
of Select Opportunities in
Today’s Market?In the current market environment,
we are finding opportunities in select
global leaders selling at bargain prices,
dominant lesser-known businesses in
necessary economic niches, blue chips of
tomorrow, and beneficiaries of short-term
misperceptions.

Global Leaders Trading at Bargain Prices—Some
of the strongest and best-known companies in the
world make up the largest portion of the Portfolio.
This fact is nothing new. What is unusual though
is short-term economic concerns over the past
year reduced the share prices of a handful of
global leaders such as Berkshire Hathaway, United
Technologies, and American Express to bargain
levels at a time of high valuations for the average
company.9 Buying top tier businesses at bargain
prices is a value investor’s dream.

Dominant Lesser-Known Businesses—Clipper Fund
also invests in a group of lesser-known businesses
that dominate dull but necessary niches in the global
economy. Whether they participate in unglamorous
industries or are headquartered in different countries,
these businesses are not household names to U.S.
investors. As a result, their shares often trade at a
discount to better-known companies despite having
the same qualities of market dominance and durability
as the global leaders described above. Such
companies include Johnson Control’s leadership
in
fire and security, building controls, and car batteries;
Liberty Global’s strength in European cable TV
and broadband; LafargeHolcim’s dominance of the
world cement industry; and Safran’s leadership in jet
engines (the company has been an equal but less
well-known partner of General Electric for more than
30 years). These companies combine the relevance
and resilience of blue chip businesses with below-average
valuations.

Blue Chips of Tomorrow—Another theme is fast-moving
companies that use innovation to disrupt
the economics of larger but less agile competitors.
Similar to evolution, capitalism is a process of
constant change that rewards businesses that
can adapt. Over the decades, we have seen
many examples of today’s disrupters emerge as
tomorrow’s blue chips. Several of Clipper Fund’s
core holdings reflect this dynamic. Amazon has
not only revolutionized the retail business, but also
the information and technology industry through
Amazon Web Services (AWS). Alphabet (the
parent company of Google) began by making the
world’s information accessible through the internet
and emerged as the largest and most profitable
advertising firm in the world, the brains behind
the vast majority of all smart phones, a leader in
internet video, and the emerging leader in artificial
intelligence and self-driving cars.

Beneficiaries of Short-Term Misperceptions—
Short-sighted investors often avoid companies
that face short-term problems, creating an
opportunity for long-term investors willing to look
beyond today’s headlines. In banking, for example,
memories of the financial crisis of 2008–2009
combined with subsequent anti-banking rhetoric
and media coverage have blinded investors to the
fact carefully selected banks are both cheap and
safe, in our opinion. Contrary to popular perception,
many top tier banks are not only reporting record
earnings but are also far better capitalized than at
any time in the last 50 years. While unloved now,
we believe the leading financial companies we own
will be big contributors to Clipper Fund’s future
returns as the reality of their strong economic
fundamentals and rising dividends eclipse current
investor perceptions.

Similarly, over the past year, investors fled the
energy sector in response to the dramatic (and
unsustainable) collapse of oil prices. While oil
prices are unknowable in the short term, they must
exceed the cost of replacing reserves over time. This
simple fact should eventually lead to higher energy
prices and should drive future returns for the well-positioned,
low-cost producers the Fund holds. As
a result, we repositioned the energy portion of the
Portfolio. We own a select group of innovative and
well-positioned energy companies with the capital
allocation discipline, management experience
and low-cost, long-lived reserves to allow them
to increase production for decades to come. Our
holdings include Apache and Occidental Petroleum.

All in all, the carefully selected businesses that
make up Clipper Fund combine above-average
resiliency and growth with below-average prices.

9Individual securities are discussed in this piece. While we believe we have a reasonable basis for our appraisals and we have confidence in our opinions,
actual results may differ materially from those we anticipate. The return of a security to the Fund will vary based on weighting and timing of purchase.
This is not a recommendation to buy, sell or hold any specific security. Past performance is not a guarantee of future results.

Where Do We See the
Biggest Risks?

Being selective when choosing which companies
to own can be a big driver of performance over the
long term. However, choosing which companies not
to own can be equally important. For example, in
the early 2000s avoiding most of the overvalued
tech and telecom darlings that collapsed when the
internet bubble burst proved a prudent strategy.
Although these bubbles seem obvious in retrospect,
investing in such companies at the time often
seems safe because their prices have gone up for
so long and the press is filled with flattering reports. In other
words, investors often feel safest when risks are
greatest. From the 1990s internet mania to the 2007
housing boom, what looked like a sure thing at the
time ended up a speculative bubble. When these
bubbles burst, disciplined investors who resisted the
siren song of the market darlings tend to outperform
as the stocks they avoided drag down the averages.

Today, we see a bubble emerging in many popular
dividend-paying stocks, often referred to as dividend
darlings. Although many of these are well known
and substantial companies, their prices have been
bid up to bubble valuations by investors whose thirst
for short-term income has blinded them to these
companies’ deteriorating fundamentals. For example,
the 25 most widely held dividend paying stocks
currently have a combined market capitalization
of more than $4 trillion and trade at almost a 20%
premium to the market. Such high valuations are
usually reserved for companies that can grow faster
than average.

However, as the first chart below shows, these
businesses have been shrinking not growing over
the last five years. As a result, the companies have
been able to maintain their earnings and dividends
only by cutting costs, reducing investments in
future growth (such as R&D and advertising) and
increasing their payout ratio (the percentage of
earnings that must be distributed to maintain
the companies’ dividends). Such trends are not
sustainable. We believe investors like us with the
discipline to avoid such popular but overvalued
companies will be rewarded with improved relative
returns as this dividend bubble deflates.

Similarly, with memories of the last recession fading,
the market has bid up the shares of low quality
companies with high leverage to levels that seem
risky to us. As shown in the chart below,
disciplined investors like us who avoid low quality
companies were penalized during this unusual
period. However, our years of experience have
taught us paying high prices for low quality is
ultimately a loser’s game. While our choice to avoid
such companies has detracted in the short term,
we expect it to contribute to relative returns in the
years ahead.

10Morningstar Direct “Stock Intersection” Report as of 11/30/17. Past performance is not a guarantee of future results.11Source: Ford Equity Research.
1/1/09–12/31/17. Quality Rating is based upon a number of factors that indicate a company’s overall financial strength and earnings predictability. Company
size, debt level, earnings history, revenue history and industry stability are all factors used to determine a firm’s quality rating. As expected, higher quality
stocks have lower average levels of earnings variability and debt as a percent of equity, in addition to higher average earnings and revenue growth persistence
ratings, and market capitalizations. High quality stocks also tend to have lower standard deviations of annual returns. Accordingly, a firm’s quality
rating may be used to gauge the risk associated with a particular stock.

Conclusion

In 2017 and over the five and 10 year periods,
Clipper Fund added to its long-term record of building
wealth for investors. Over the last three and five
year periods, Clipper Fund has also outperformed
the passive indexes. A $10,000 investment in
Clipper Fund when we began managing the Fund
would now be worth $22,101.12 While we have more
than doubled the value of an investment made when
were entrusted with management of Clipper Fund
in January 2006, we still have ground to make up
and will do our best to build on our outperformance
over the last five years.

While the consensus wisdom currently favors
passive investing, significant data shows active and
passive strategies move in cycles. A review of these
cycles indicates active investing may be poised for
a period of relatively stronger returns particularly
if market returns moderate in the years ahead.
Furthermore, contrary to consensus thinking, a select
group of active managers with characteristics such
as low costs, an alignment of interests with their
shareholders and differentiation have outperformed
in the vast majority of all rolling ten year periods.

Turning from active management in general to
the prospects for Clipper Fund in particular, the
Fund’s holdings of global leaders, dominant but
lesser known companies, blue chips of tomorrow
and beneficiaries of short-term misperceptions
offer a powerful combination of strong, attractively
priced businesses that should add to our long-term
record of building shareholder wealth in the years
ahead. In addition to the returns generated by these
companies, Clipper Fund relative returns may also
benefit from our decision to avoid widely held but
overvalued segments of the index such as dividend
darlings and over-priced low quality companies.

As always, we recognize and expect the years
ahead will include times of market corrections
and disruptions. While unpleasant, such periods
are inevitable and generally create opportunities
for investors with the judgment and experience to
take advantage of them. In short, at a time when
pundits and commentators are making the case
experience and judgment do not matter and the
best investors can hope for is an average result, we
strongly disagree. We believe a carefully selected
Portfolio of durable, well-managed businesses with
competitive advantages, selling at a discount to
true value and overseen by a seasoned team with
a long track record of generating proven results
will produce a better-than-average outcome. In
investing, as in any other profession, skill matters.
Since we assumed management of Clipper Fund
in 2006, we have continued Clipper Funds long
record of building wealth for our shareholders.
With more than $145 million invested alongside
our shareholders, we have every incentive and
intention to build on this record in the years and
decades ahead.13

We value the trust you have placed in us and
look forward to continuing our investment
journey together.

12Past performance is not a guarantee of future results.13As of December 31, 2017.

This report is authorized for use by existing shareholders. A current Clipper
Fund prospectus must accompany or precede this material if it is distributed to
prospective shareholders. You should carefully consider the Fund’s investment
objective, risks, fees, and expenses before investing. Read the prospectus
carefully before you invest or send money.

This report includes candid statements and observations regarding investment
strategies, individual securities, and economic and market conditions;
however, there is no guarantee that these statements, opinions or forecasts
will prove to be correct. These comments may also include the expression
of opinions that are speculative in nature and should not be relied on as
statements of fact.

Objective and Risks Clipper Fund’s investment objective is long-term
capital growth and capital preservation. There can be no assurance that
the Fund will achieve its objective. The Fund invests primarily in equity
securities issued by large companies with market capitalizations of at least
$10 billion. Some important risks of an investment in the Fund are: common
stock risk: an adverse event may have a negative impact on a company
and could result in a decline in the price of its common stock; depositary
receipts risk: depositary receipts may trade at a discount (or premium) to
the underlying security and may be less liquid than the underlying securities
listed on an exchange; fees and expenses risk: the Fund may not earn
enough through income and capital appreciation to offset the operating
expenses of the Fund; financial services risk: investing a significant portion
of assets in the financial services sector may cause the Fund to be more
sensitive to systemic risk, regulatory actions, changes in interest rates, nondiversified
loan portfolios, credit, and competition; focused portfolio risk:
investing in a limited number of companies causes changes in the value of
a single security to have a more significant effect on the value of the Fund’s
total portfolio; foreign country risk: foreign companies may be subject to
greater risk as foreign economies may not be as strong or diversified; As of
December 31, 2017, the Fund had approximately 13.8% of assets invested
in foreign companies; foreign currency risk: the change in value of a foreign
currency against the U.S. dollar will result in a change in the U.S. dollar
value of securities denominated in that foreign currency; headline risk:
the Fund may invest in a company when the company becomes the center
of controversy. The company’s stock may never recover or may become
worthless; large-capitalization companies risk: companies with $10 billion
or more in market capitalization generally experience slower rates of growth
in earnings per share than do mid- and small-capitalization companies;
manager risk: poor security selection may cause the Fund to underperform
relevant benchmarks; mid- and small-capitalization companies risk:
companies with less than $10 billion in market capitalization typically have
more limited product lines, markets and financial resources than larger
companies, and may trade less frequently and in more limited volume; and
stock market risk: stock markets have periods of rising prices and periods
of falling prices, including sharp declines. See the prospectus for a complete
description of the principal risks.

Davis Advisors is committed to communicating with our investment
partners as candidly as possible because we believe our investors benefit
from understanding our investment philosophy and approach. Our views
and opinions include “forward-looking statements” which may or may
not be accurate over the long term. Forward-looking statements can
be identified by words like “believe,” “expect,” “anticipate,” or similar
expressions. You should not place undue reliance on forward-looking
statements, which are current as of the date of this report. We disclaim any
obligation to update or alter any forward-looking statements, whether as
a result of new information, future events, or otherwise. While we believe
we have a reasonable basis for our appraisals and we have confidence in
our opinions, actual results may differ materially from those we anticipate.

The information provided in this material should not be considered
a recommendation to buy, sell or hold any particular security. As of
December 31, 2017, the top ten holdings of Clipper Fund were: Alphabet,
8.40%; Berkshire Hathaway–Class A, 7.99%; Amazon.com, 7.58%; Capital
One Financial, 6.34%; United Technologies, 6.19%; Wells Fargo, 6.11%;
Bank of New York Mellon, 5.97%; Markel, 4.94%; Johnson Controls
International, 4.81%; Apache, 4.76%.

Clipper Fund has adopted a Portfolio Holdings Disclosure policy that
governs the release of non-public portfolio holding information. This policy
is described in the prospectus. Holding percentages are subject to change.
Click here or call 800-432-2504 for the most current public
portfolio holdings information.

We gather our index data from a combination of reputable sources,
including, but not limited to, Thomson Financial, Lipper and index websites.

The S&P 500 Index is an unmanaged index of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The
Index is adjusted for dividends, weighted towards stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks. Investments cannot be made directly
in an index.

After April 30, 2018, this material must be accompanied by a supplement
containing performance data for the most recent quarter end.

Shares of the Clipper Fund are not deposits or obligations of any bank,
are not guaranteed by any bank, are not insured by the FDIC or any
other agency, and involve investment risks, including possible loss of
the principal amount invested.